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MODULE 1
1
TEXT BOOKS
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What is Business Analytics?
Using tools and technique to turn data into
meaningful business insight .
Tools and
Data Techniques Business Insight
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Evolution of Business Analytics
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Scope of Business Analytics
Descriptive analytics
- uses data to understand past and present
Predictive analytics
- analyzes past performance
Prescriptive analytics
- uses optimization techniques
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Step 3. Analyze the data
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Step 4. Predict what is likely to
happen
• At this stage, the analyst will model the data
using predictive techniques that include decision
trees, neural networks .
• These techniques will uncover insights and
patterns that highlight relationships and ‘hidden
evidences’ of the most influential variables.
• The analyst will then compare the predictive
values with the actual values and compute the
predictive errors.
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Step 5. Optimize (find the best
solution)
• The analyst will select the optimal solution
and model based on the
– lowest error,
– management targets
– and his intuitive recognition.
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Step 6. Make a decision and measure
the outcome
• The analyst will then make decisions and take
action based on the derived insights from the
model and the organizational goals
• An appropriate period of time after this
action has been taken, the outcome of the
action is then measured
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Step 7. Update the system with the
results of the decision
• Finally the results of the decision and action
and the new insights derived from the model
are recorded and updated into the database.
• Information such as,
– ‘was the decision and action effective?’,
– ‘what was the return on investment?’
are uploaded into the database.
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Decision Models
Model:
An abstraction or representation of a real
system, idea, or object
Captures the most important features
Can be a written or verbal description, a visual
display, a mathematical formula, or a
spreadsheet representation
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Decision Models
A decision model is a model used to understand,
analyze, or facilitate decision making.
Types of model input
- data
• which are assumed to be constant for purposes of the
model. eg.costs, machine capacities.
- uncontrollable variables
• which are quantities that can change but cannot be
directly controlled by the decision maker. Eg .customer
demand, inflation rates.
- decision variables (controllable)
• can be selected by decision maker. eg. production quantities
staffing levels.
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Types of model output
- performance measures
- behavioral measures
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Decision Models
Figure 1.4
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Copyright © 2013 Pearson Education,
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Inc. publishing as Prentice Hall
• The decision depends on volume of demand (an
uncontrollable variable);
• for high volumes, the cost to manufacture in-
house will be lower than outsourcing, because
the fixed costs can be spread over a large number
of units.
• For small volumes, it would be more economical
to outsource.
• the break-even point would facilitate the
decision.
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